Frugal customers are becoming an ominous threat to Macy's

A
woman shops for a present at the scarf section inside Macy's
Manhattan department store in New YorkThomson Reuters

The days of full-priced department store merchandise might be
over.

Macy's same-store
sales declined 2.6% in the second quarter, and the
company blames consumers who are increasingly
hesitant to pay for brand name clothing and
handbags.

While sales at off-priced retailers like T.J. Maxx are
soaring, traditional department stores are being forced to
discount. Macy's and Kohl's are both in the process of
launching lower-priced outlet stores.

Macy's CFO Karen Hoguet told investors that
healthcare, electronics, and home improvement are
getting a bigger share of consumer dollars.

Younger consumers are also moving away from brand names and
logos, a trend that is also killing teen retailers like
Abercrombie & Fitch and Aeropostale.

High-end department store Bloomingdale's, which is also owned by
Macy's, was also hurt by the discounting consumers increasingly
demand.

Shoppers
are increasingly choosing discounts over the experience of going
to a luxury department store.Flickr/Natalie
Litz

People who make between $100,000 and $250,000 are "making very
careful decisions" on discretionary purchases, luxury-marketing
expert
Pam Danziger told Bloomberg.

"That's smart for them, but it's certainly not good for the
economy," she said.

Companies including Ralph Lauren, Coach, and Michael Kors are
going after consumers ages 25 to 34 with money to spend but who
aren't rich, Danziger said in a recent report.

These customers make up 18% of households, but as they suffer
sluggish income growth, they are increasingly conservative with
their dollars.